Can you stop paying the mortgage and keep the house?

As falling U.S. home prices leave mortgage borrowers owing more
than their homes are worth, borrowers are encouraged to stop paying
the mortgage, move out of the house, and send the keys to the bank
("jingle mail"). That much is well known. But, as this Bloomberg story explains, the practice of selling and
reselling mortgage loans, packaging them into securities and selling
them again, and so forth, is enabling some borrowers to stop paying
their mortgages and keep their homes, because nobody can prove
to whom the money is owed. (Jingle Bells?) Presumably, if the
borrowers can stay in the homes long enough, they eventually acquire
ownership through squatting laws. (Jingle all the way?)

Defaulting borrowers don't need to be dishonest when resisting
foreclosure. They only need to say: "I know I owe money to
someone. But if I no longer owe it to the lender from whom I borrowed
it, and if the present claimant doesn't have the paperwork for it,
then I have no way of knowing to whom I owe it, and neither does the
court." And that's the truth. But the borrower needs to be
assertive. If the purported creditor pretends to have lost the
mortgage note or offers a mere copy of it, and if the borrower doesn't
question the claim, the court will rubber-stamp it. The borrower also
needs to keep paying the property taxes, lest the government start
separate foreclosure proceedings.

Of course, thanks to the alchemy of fractional-reserve banking, the
money that is not returned to banks by stay-put defaulting
borrowers will have the usual 12-times multiplier for the reduction in
the banks' capacity to make further loans. The credit squeeze just
got tighter.